Shares in Elan drifted lower yesterday as crucial meetings continued at the company ahead of tomorrow's deadline for filing its annual report with the US Securities and Exchange Commission (SEC).

Filing of the 2002 annual report has been delayed since June 30th as the company attempts to reach agreement with the SEC on certain accounting treatments.

Failure to file by tomorrow would cause Elan to risk breaching certain of its debt covenants, which could, in a worst-case scenario, trigger the early repayment of some $2 billion (€1.74 billion) in debt and cause the company's collapse.

An Elan spokeswoman declined to comment on the progress Elan was making in its discussions with the SEC yesterday, except to say: "We are working as diligently as possible with the SEC to get this resolved."

In Dublin, Elan shares lost five cents to €3.88 yesterday, while in New York they were down 19 US cents to $4.51 by the close.

The crux of Elan's problems with the SEC relates to a disagreement over the appropriate accounting treatment of some off-balance sheet special purpose vehicles.

Elan is believed to have resolved its problems with the SEC over the treatment of two of three such vehicles. But it is not yet clear whether it will succeed in addressing the issues surrounding the third vehicle, Elan Pharmaceutical Investments 3 (EPIL3), and a related transaction, by tomorrow.

But if the company can persuade the holders of its EPIL debt not to recall their debt on July 30th - as they are entitled to do if they have not been furnished with the annual report - it can buy extra time to reach agreement with the SEC on the accounting issues.

It would then have until September 14th, when accounts must be provided to the holders of $650 million of senior notes, to resolve the issues with the SEC.